January 21, 2016
One of the keys to running a successful business is understanding and managing your expenses. Knowing where dollars are being spent and allocating funds properly allows you to manage your resources effectively.
However, this is typically easier said than done. For most businesses, IT expenses are frequently misappropriated or undocumented. Few businesses understand the true cost of their IT services. Here are three things to look out for when reviewing your IT budget and analyzing your costs:
#1 - Improperly Coded Expenses
It's not uncommon for employees to code IT expenses incorrectly. For example, one of your sales people needs a new laptop. They purchase a laptop and turn it in as an expense for the sales team. On the surface, it seems to make sense – the sales team purchased something for sales related activities, ergo, it's their expense.
However, any purchase of IT equipment should be included in the IT expense category. It shouldn't matter who is using the equipment – if your business purchases laptops, printers or other computing equipment, they should all count as IT expenses.
Improperly coded expenses can add up over time. Consider this: imagine you have five divisions within your business, one of which is IT. Each of the five divisions purchases two $1,000 laptops. If those laptops are improperly accounted for, at the end of the year, your IT division looks like it only spent $2,000. However, when those laptops are properly coded, the true IT spend would be $10,000.
#2 - Ignoring Small Vendors
It's natural to focus on big expenses. Most businesses have one or two major vendors that account for the majority of their IT purchases. However, even if those two vendors account for 75% of your businesses IT purchases, that means the other dozen small vendors still account for a quarter of your annual budget. Don't let these smaller purchases get lost in your accounting detail.
The key to solving this problem and having an accurate budget is to ensure employees keep track of every purchase, no matter how big or small. The amount you spend with these smaller vendors will add up to more than you anticipate.
#3 - Who is Actually Considered "IT?"
Smaller businesses in particular may not have a dedicated IT person on staff. However, when there's an IT problem – the printer isn't working, or the Internet seems to be down – every business typically has one or two people they can turn to. However, since this person likely has another role, they're not seen as "IT", which also means their salary isn't counted towards the IT budget.
In order to get an accurate idea of the total time your employees spend on IT issues, it’s important to ensure that employees who solve IT problems in your office are able to track the time spent doing so. Next, let’s do the math. If you're paying an employee $40,000 a year, and they're spending 10% of their time working on IT issues, this means you're spending $4,000 on IT each year that may not be accounted for, without considering employee benefits.
When it Comes to Cost of IT Services, Details Matter
It's important for all businesses to know what they are truly spending on their IT systems and services. Few businesses forget the big purchases from their major vendors, or to allocate the salary of a full-time IT person, but the small details can end up making a big difference.
An assessment of your Business IT will deliver a true picture of your IT services costs, and identify any areas or opportunities for improvement. Request a free assessment today from one of our specialists.
